Fall’s Housing Trends
It’s not a bad time to be a home buyer. Just don’t think the odds will be on your side indefinitely.
Mortgage standards, such as credit score requirements, have started to loosen, and mortgage rates remain low. Although it is a seller’s market in many parts of the country, many sellers realize that today’s buyers are more conservative and will not overpay.
Still, if you are planning to buy, act quickly. The housing market is expected to heat up in coming months and rates will eventually rise — believe it or not.
You may have heard that it’s hard to get a mortgage unless you have perfect credit. But in reality, lenders seem to be loosening their credit standards. The average credit score for mortgages that closed in August was 727, according to Ellie Mae’s latest origination insight report. That’s still a high score, but it’s much lower than the 750 average seen a couple years ago.
If you think buyers aren’t willing to move out of their comfort zones to live in more affordable housing markets, you may want to reconsider. Many buyers, especially the younger generation, are relocating to areas that didn’t seem as appealing before, but now they are prioritizing affordability, says Daren Blomquist, vice president for RealtyTrac, a real estate data company in Irvine, California.
RealtyTrac recently compiled a list of the most affordable counties in the nation, based on median home prices and the percentage of income required for the mortgage payments.
For instance, in Fayetteville, North Carolina, buyers spend about 13 percent of their incomes on house payments for an average home, according to RealtyTrac. The millennial population there has jumped more than 20 percent since 2007. The younger generation views a house as a place to live and not the great investment that their parents once thought they had made, Blomquist says.
This may be your last chance to lock a rate while mortgage rates are at the bottom. 30-year rates increased 13 basis points from the same week of the previous month, showing the first significant movement in rates in recent months.
The Mortgage Bankers Association expects the 30-year fixed rate to climb to 4.5 percent by the fourth quarter of the year, according to the association’s latest forecast. That’s still an attractive rate, but if the MBA is right, the fixed rate will climb gradually, reaching 5 percent by mid-2015.
If you are still looking for a home and are not ready to lock yet, you probably have a bit of time. But if you are trying to time the market or are hoping for rates to drop further, you have very little chances of succeeding with your bet, mortgage analysts say.
Total housing inventory fell 1.7 percent at the end of August to 2.31 million existing homes available for sale, according to the latest report by the National Association of Realtors. That represents a 5.5-month supply of homes and it’s 4.5 percent higher than a year ago.
With more homes to choose from, buyers who have been shopping for a home for months but who just haven’t been able to find the right home yet, will be able to close on a deal, analysts say. Pent-up demand from potential buyers who have been sitting on the sidelines also may lead to more sales this fall.